US dollar analysis: Will NFP help the USD rise from the dead?

Matt Weller
By :  ,  Head of Market Research

NFP preview takeaways

  • The Fed is split 50/50 on one last rate hike next month heading into the NFP report
  • The leading indicators for NFP unanimously deteriorated over the last month
  • The US dollar is testing longer-term support and could see a bounce on a decent jobs reading

NFP overview

Defying all expectations, the start of 2023 was characterized by strong US economic growth, inflation moderating only slightly and the labor market remaining tight as a drum.

Based on the leading indicators and this week’s coordinated slowdown in economic data, this month’s NFP report will put that theme to the test. As we discuss below, the leading indicators for the marquee monthly jobs report unanimously point to a loosening labor market relative to last month.

With traders currently pricing in essentially a 50/50 chance of one last rate hike from the FOMC next month, the NFP report will help tip the proverbial scales for Jerome Powell and company:


Source: StoneX

Are these expectations justified? We dive into the key leading indicators for Friday’s critical jobs report below!

NFP forecast

As regular readers know, we focus on four historically reliable leading indicators to help handicap each month’s NFP report:

  • The ISM Services PMI Employment component printed at 51.3, down nearly 3% from last month’s 54.0 reading.
  • The ISM Manufacturing PMI Employment component printed at 46.9, solidly in contractionary territory and below last month’s 49.1 print.
  • The ADP Employment report came in at 145K net new jobs, below expectations and last month’s upwardly-revised 261K result.
  • Finally, the 4-week moving average of initial unemployment claims were roughly steady at 198K, a tick, still near multi-decade lows but showing signs of turning higher.

Weighing the data and our internal models, the leading indicators point to a slightly below expectation reading in this month’s NFP report, with headline job growth potentially coming in somewhere in the 150K-250K range.

Regardless, the month-to-month fluctuations in this report are notoriously difficult to predict, so we wouldn’t put too much stock into any forecasts (including ours). As always, the other aspects of the release, prominently including the closely-watched average hourly earnings figure which rose 0.2% m/m last month, will likely be just as important as the headline figure itself.

US dollar impact from NFP


Wages < 0.2% m/m

Wages 0.2-0.4% m/m

Wages > 0.4% m/m

< 175K jobs

Bearish USD

Neutral USD

Slightly Bullish USD

175K – 275K jobs

Slightly Bearish USD

Slightly Bullish USD

Bullish USD

> 275K jobs

Neutral USD

Bullish USD

Strongly Bullish USD

March was a rough month for the world’s reserve currency, with the US dollar index hitting resistance in the mid-105.00s during the first week and falling more than 3% to approach 1-year lows near 102.00 as we go to press

In terms of potential trade setups, readers may want to consider EUR/USD sell opportunities on a strong US jobs report. The world’s most widely-traded currency pair is testing major resistance below 1.10 and could be prone to a holiday-weekend pullback if the NFP report suggests that interest rate expectation gap between the ECB and Fed may not tighten as much as expected through the summer.

Meanwhile, a weak jobs report could present a buy opportunity in GBP/USD. The pair recently saw a major breakout above resistance in the 1.2400-50 range and is retesting that area as of writing. If fundamentals support more dollar weakness, GBP/USD could well find support at the previous resistance zone and continue its rally to above 1.2500 again.

-- Written by Matt Weller, Global Head of Research

Follow Matt on Twitter @MWellerFX

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